The ITO, Ward-2(2)(4), Surat V. M/s. Pankaj Enka Pvt. Ltd., Surat

ITA 3050/AHD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1383 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RASESH SHAH
• Assessee Lawyers: ANUPAMA SINGLA
• Keywords: Unexplained cash credit; Principle of natural justice; Period of limitation; Question of law; Onus to prove; Time period of passing order
• Section: 143(3); 133(6); 195; 13; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ITA NO.3050/AHD/2016 ( / ASSESSMENT YEAR: (2012-13) (VIRTUAL COURT HEARING) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), SURAT. V S. M/S.PANKAJ ENKA PVT. LTD., 2161, RAGHUKUL MARKET, RING ROAD, SURAT 395002. ./ ./ PAN/GIR NO.: AABCP 4028 R (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI RASESH SHAH - CA RESPONDENT BY : MS.ANUPAMA SINGLA SR.DR / DATE OF HEARING : 15/06/2021 /DATE OF PRONOUNCEMENT : 30/06/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE REVENUE PERTAINING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS)- 2, DATED 04.08.2016, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE LD.ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DATED 31.03.2015. 2. GRIEVANCES RAISED BY THE REVENUE ARE AS FOLLOWS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITIONS OF RS. 1,80,00,000/.- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL & SHARE PREMIUM. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN NOT APPRECIATING THE FACT THAT THE SHARE APPLICATION MONEY FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE RECEIVED FROM THREE (3) COMPANIES WERE LACKING GENUINENESS OF TRANSACTION. THE LD CIT(A) HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE COMPANY COULD NOT ESTABLISH THE CREDITWORTHINESS OF THESE 3 COMPANIES AND AO AFTER CONDUCTING INQUIRIES WAS NOT SATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE COMPANY, HENCE THE ADDITIONS MADE SHOULD HAVE BEEN SUSTAINED. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN NOT APPRECIATING THE FACT THAT GENUINENESS AND CREDITWORTHINESS OF SHARE APPLICANTS WERE NOT PROVED AS CREDITS IN THEIR BANK ACCOUNTS WERE FROM NON-EXISTENT ENTITIES AND THUS THE SUBSEQUENT PAGE | 2 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., TRANSFER OF FUNDS TO ASSESSEE COMPANY TOWARDS SHARE CAPITAL/PREMIUM WAS NON GENUINE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN ACCEPTING FRESH EVIDENCE REGARDING IDENTITY OF INVESTORS, THEIR CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS, IN CONTRAVENTION OF SET PRINCIPLES, WITHOUT REMANDING THE MATTER TO THE AO AND THEREBY THE DECISION OF THE CIT(A) IS PERVERSE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A)-I SURAT MAY BE SET- ASIDE AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. 2. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM THE MATERIAL ON RECORD, ARE AS FOLLOWS. BEFORE US, ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF WHOLESALE TRADING OF IMPORTED AND LOCAL YARNS. THE ASSESSEE COMPANY HAS SHOWN GROSS PROFIT OF RS.6,07,78,660/- @ 6.65% ON TOTAL TURNOVER OF RS.91,33,30,051/- AS AGAINST GROSS PROFIT OF RS.2,77,29 240/-, @ 5.45% ON TOTAL TURNOVER OF RS.50,91,94,705/- SHOWN IN THE IMMEDIATELY PRECEDING YEAR, I.E. A.Y. 2011-12. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS RECEIVED AMOUNT OF RS.2,00,00,000/- AGAINST SHARE CAPITAL ALONG WITH PREMIUM THEREUPON, I.E. SHARES OF FACE VALUE OF RS.10/- ISSUED AT PREMIUM OF RS.90 PER SHARE. THE DETAILS SUBMITTED BY THE ASSESSEE REGARDING THE SAME, ARE AS UNDER: SR.NO. NAME & ADDRESSES OF THE SHARE HOLDERS NO.OF SHARES AMOUNT OF CAPITAL RECEIVED AMOUNT OF SHARE PREMIUM, IF ANY RECEIVED TOTAL DATE IN WHICH RECEIVED IN BANK ACCOUNT OF THE ASSESSEE 1) YASH BUILDHOME DEVELOPERS LTD., 3/304, ASHISH COMPLEX, NEW RAJDHANI ENCLAVE, VIKASH MARG, NEW DELHI 50000 500000 2000000 2500000 11.05.2011 10000 100000 400000 500000 13.05.2011 60000 600000 2400000 3000000 18.05.2011 40000 400000 1600000 2000000 24.05.2011 TOTAL 8000000 2) YASH TRADEX OVERSEAS PVT. LTD., 3/304, ASHISH COMPLEX, NEW RAJDHANI ENCLAVE, 100000 1000000 4000000 5000000 30.05.2011 PAGE | 3 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., VIKASH MARG, NEW DELHI TOTAL 5000000 3) YASH IT SOLUTIONS PVT. LTD., 201, RAJ TOWER, ALKNANDA COMMERCIAL COMPLEX, ALKNANDA, DELHI 50000 500000 2000000 2500000 30.05.2011 44000 440000 1760000 2200000 01.06.2011 6000 60000 240000 300000 08.06.2011 TOTAL 5000000 4) RAMA TRADE LINK PVT. LTD., 105, J.K. TOWER, NEAR SUB JAIL, RING ROAD, SURAT. 40000 400000 1600000 2000000 08.06.2011 TOTAL 2000000 TOTAL SHARE CAPITAL AND SHARE PREMIUM IN A.Y.2012-13 20000000 3. THE ABOVE CHART SHOWS THAT THERE ARE FOUR SHARE APPLICANT COMPANIES. THE SHARE APPLICANT, RAMA TRADE LINK PVT. LTD, SHOWN AT SERIAL NO.4 IN THE ABOVE TABLE, IS AN ASSOCIATE CONCERN OF THE ASSESSEE GROUP. THE ASSESSING OFFICER ACCEPTED, RAMA TRADE LINK PVT. LTD, (SHARE APPLICANT) AS A GENUINE SHARE APPLICANT COMPANY AND OBSERVED THAT IN CASE OF SAID COMPANY, THE ASSESSEE HAS PROVED THREE INGREDIENTS OF SECTION 68 OF THE ACT, THAT IS, IDENTITY, CREDITWORTHINESS AND GENUINENESS, THEREFORE, ASSESSING OFFICER DID NOT MAKE ADDITION OF RS.20,00,000/-. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE COMPANY HAS RECEIVED AMOUNT OF RS.2,00,00,000/- FOR SHARE CAPITAL/SHARE PREMIUM FROM FOUR CONCERNS, MENTIONED IN THE ABOVE CHART. THE AMOUNT OF SHARE PREMIUM WAS OF RS.1,60,00,000/- AND SHARE CAPITAL OF RS. 40,00,000/- RECEIVED DURING THE YEAR. THE AO ACCEPTED THE SHARE CAPITAL OF RS.4,00,000/- AND RS.16,00,000/- OF SHARE PREMIUM RECEIVED FROM RAMA TRADE LINK PVT. LTD. DURING THE YEAR AS GENUINE BEING A SISTER CONCERN OF THE ASSESSEE COMPANY. THE AO MADE INQUIRIES IN RELATION TO OTHER THREE INVESTOR CONCERNS OF DELHI AND THE SHARE APPLICATION MONEY RECEIVED FROM THESE THREE INVESTOR COMPANIES WAS TREATED AS UNDISCLOSED ON ACCOUNT OF THE FINDINGS THAT THE AUDIT REPORT AND THE BANK, STATEMENT OF THESE INVESTORS ARE NOT RECONCILED, THE INCOME LEVEL OF THE INVESTOR IS TOO LOW; MAJOR DISCREPANCIES IN THE PAGE | 4 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., BANK ACCOUNT; SHARES HAVE BEEN ISSUED AT THE PREMIUM OF RS.40/-, THOUGH THE EPS OF THE ASSESSEE WAS ONLY RS. 0.02 AND NO DIVIDEND HAVE BEEN PAID TO THE INVESTORS. THEREFORE, BASED ON THESE FACTS, ASSESSING OFFICER HAS ISSUED A SHOW CAUSE NOTICE DATED 23.03.2015 WHEREIN THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY AN AMOUNT OF RS.1,80,00,000/-, BEING THE AMOUNT CLAIMED TO BE RECEIVED TOWARDS SHARE APPLICATION MONEY AND PREMIUM, SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 5. IN RESPONSE, THE ASSESSEE SUBMITTED BEFORE THE AO THAT ALL THE TRANSACTIONS WERE DULY SUPPORTED BY SHARE APPLICATION FORM, ACKNOWLEDGEMENT OF RETURN OF INCOME, AUDITED FINANCIAL STATEMENTS, BANK STATEMENTS, MOA AND AOA OF THE SHARE APPLICANT. IT WAS CONTENDED THAT THE TRANSACTIONS HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS AND THE INVESTOR COMPANIES ARE REGISTERED WITH ROC AND ARE ACTIVE COMPANIES AS PER ROC RECORDS. THE ASSESSEE RELIED ON SEVERAL CASE LAWS IN SUPPORT OF HIS CONTENTION REGARDING THE GENUINENESS OF THE SHARE CAPITAL. THE ASSESSEE SUBMITTED THAT THE AO HAD ISSUED A SHOW CAUSE NOTICE DATED 23.03.2015 AT THE FAG END OF THE LIMITATION PERIOD BUT STILL THE ASSESSEE FILED THE REPLY GIVING COMPLETE DETAILS TO THE AO ON 28.03.2015 BUT THE AO DID NOT CONSIDER THE DETAILS SUBMITTED IN RESPONSE TO THE SHOW CAUSE NOTICE IN THE ASSESSMENT ORDER. 6. HOWEVER, THE ASSESSING OFFICER REJECTED THE ABOVE CONTENTION OF THE ASSESSEE AND NOTED THAT IN CASE OF THREE SHARE APPLICANT COMPANIES, NAMELY, YASH BUILDHOME DEVELOPERS LTD., YASH TRADEX OVERSEAS PVT. LTD., AND YASH IT SOLUTIONS PVT. LTD., THE ASSESSEE COMPANY HAS FAILED TO PROVE THREE INGREDIENTS OF SECTION 68 OF THE ACT, THAT IS, IDENTITY, CREDITWORTHINESS AND GENUINENESS, THEREFORE, ASSESSING OFFICER MADE ADDITION TO THE TUNE OF RS.1,80,00,000/- (RS.2,00,00,000- RS.20,00,000 WHICH RELATES TO RAMA TRADE LINK PVT. LTD), UNDER SECTION 68 OF THE ACT. PAGE | 5 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., 7. AGGRIEVED BY THE ORDER OF THE LD.ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE LD.ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY RELIED UPON THE ORDERS PASSED BY THE ASSESSING OFFICER. HE STATES BEFORE THE BENCH THAT DECISION OF THE LD. CIT(A) IS NOT ACCEPTABLE. THE LD. CIT(A) HAS DELETED THE ADDITION OF RS.1,80,00,000/- WITHOUT LOOKING THE SUBSTANCE OF THE TRANSACTIONS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY RECEIVED FROM M/S YASH BUILDHOME DEVELOPERS LTD.-RS.80,00,000/-, YASH TRADEX OVERSEAS PVT. LTD.- RS.50,00,000/- AND YASH IT SOLUTIONS PVT. LTD. - RS.50,00,000/-. AS PER THE DETAILED DISCUSSION IN THE ASSESSMENT ORDER, THE ASSESSEE COMPANY FAILED TO ESTABLISH THE GENUINENESS AND CREDITWORTHINESS OF THE FUNDS INTRODUCED BY THE ABOVE COMPANIES IN THE ASSESSEE COMPANY.THE SOURCE OF THE FUNDS ARRANGED BY THE INVESTOR COMPANIES REMAINED UNEXPLAINED. THE REPLY OF THE ASSESSEE, DURING THE ASSESSMENT STAGE, REGARDING THE FUNDS ARRANGED DOES NOT COMMENSURATE WITH THE BUSINESS AFFAIRS OF THE INVESTOR COMPANIES. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAD MISERABLY FAILED TO EXPLAIN THE NATURE AND SOURCE OF THE SUMS IN QUESTION, SO THE AO HAS RIGHTLY ADDED THE SUMS U/S. 68 OF THE ACT. 9. ON THE OTHER HAND, SHRI RASESH SHAH, LEARNED COUNSEL FOR THE ASSESSEE, ASSAILING THE ORDER OF THE ASSESSING OFFICER, DREW OUR ATTENTION TO THE FACT THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY WHICH IS ENGAGED IN THE BUSINESS OF WHOLESALE TRADING OF IMPORTED AND LOCAL YARNS. THE ASSESSEE COMPANY HAS SHOWN GROSS PROFIT OF RS.6,07,78,660/- @ 6.65% ON TOTAL TURNOVER OF RS.91,33,30,051/- AS AGAINST GROSS PROFIT OF RS.2,77,29 240/-, @ 5.45% ON TOTAL TURNOVER OF RS.50,91,94,705/- SHOWN IN THE IMMEDIATELY PRECEDING YEAR, I.E. A.Y. 2011-12. THESE TURNOVER FIGURES OF THE ASSESSEE COMPANY SHOWS THAT ASSESSEE COMPANY IS A PROFIT MAKING COMPANY AND NOT A MERE PAPER COMPANY. THE ASSESSEE COMPANY HAS GOODWILL IN THE MARKET.THE ASSESSEE SUBMITTED BEFORE THE AO THAT ALL THE TRANSACTIONS WERE DULY SUPPORTED BY PAGE | 6 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., SHARE APPLICATION FORM, ACKNOWLEDGEMENT OF RETURN OF INCOME, AUDITED FINANCIAL STATEMENTS, BANK STATEMENTS, MOA AND AOA OF THE SHARE APPLICANT. IT WAS CONTENDED THAT THE TRANSACTIONS HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS AND THE INVESTOR COMPANIES ARE REGISTERED WITH ROC AND ARE ACTIVE COMPANIES AS PER ROC RECORDS. THE LD COUNSEL RELIED ON SEVERAL CASE LAWS IN SUPPORT OF HIS CONTENTION REGARDING THE GENUINENESS OF THE SHARE CAPITAL AND FINALLY PRAYED THE BENCH THAT ORDER PASSED BY THE LD CIT(A) MAY BE SUSTAINED. 10. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTION. WE HAVE PERUSED CASE FILE AS WELL AS PAPER BOOKS FURNISHED BY ASSESSEE WITH THE ABLE ASSISTANCE OF MS.ANUPAMA SINGLA, LEARNED SENIOR-DR FOR THE REVENUE, REPRESENTING THE REVENUE AND SHRI, RASESH SHAH, FCA, REPRESENTING THE ASSESSEE. WE NOTE THAT ACCORDING TO SECTION 68 OF THE INCOME TAX ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT ASSESSMENT YEAR. THE ASSESSING OFFICER MAY CONSIDER SUCH SUM AS CASH CREDIT DUE TO LACK OF SUFFICIENT EXPLANATION. IT IS WELL KNOWN THAT PROVISIONS OF SECTION 68 HAVE BEEN INTRODUCED INTO THE TAXING ENACTMENTS STEP BY STEP IN ORDER TO PLUG LOOPHOLES. EVEN LONG PRIOR TO THE INTRODUCTION OF SECTION 68 OF THE ACT, IN THE STATUTE BOOK, COURTS HAD HELD THAT WHERE ANY AMOUNTS WERE FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED WAS, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY, THE SUMS SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THE RELEVANT ASSESSMENT YEAR. WE NOTE THAT WITH EFFECT FROM ASSESSMENT YEAR 2013-14, SECTION 68 OF THE INCOME TAX ACT HAS BEEN AMENDED TO PROVIDE THAT IF A CLOSELY HELD COMPANY FAILS TO EXPLAIN THE SOURCE OF SHARE CAPITAL, SHARE PREMIUM OR SHARE APPLICATION MONEY RECEIVED BY IT TO THE SATISFACTION OF THE ASSESSING OFFICER, THE SAME SHALL BE DEEMED TO BE THE INCOME OF THE COMPANY UNDER SECTION 68 OF THE ACT. WE NOTE THAT THE AMENDED PROVISIONS OF PAGE | 7 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., SECTION 68, IS NOT APPLICABLE TO THE ASSESSEE COMPANY UNDER CONSIDERATION, AS THE ASSESSEE`S, ASSESSMENT YEAR IS 2012-13. THE HON`BLE BOMBAY HIGH COURT, IN THE CASE OF GAGANDEEP INFRASTRUCTURE 80 TAXMANN.COM 272 (BOM), HELD THAT AMENDMENT TO SECTION 68 IS PROSPECTIVE AND APPLICABLE ONLY FROM ASSESSMENT YEAR 2013-14. IN THE ASSESSEE`S CASE, THE ASSESSMENT YEAR INVOLVED IS ASSESSMENT YEAR 2012-13 , THEREFORE, WE NOTE THAT THE AMENDED PROVISIONS OF SECTION 68 OF THE ACT, DOES NOT APPLY TO THE ASSESSEE UNDER CONSIDERATION. 11.WITH THIS BACKGROUND, NOW WE SHALL PROCEED TO EXAMINE IN THE ASSESSEE`S CASE UNDER CONSIDERATION, WHETHER ASSESSEE HAS DISCHARGED HIS ONUS TO PROVE, PRIMA FACIE, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBERS COMPANIES. WE NOTE THAT DURING THE ASSESSMENT STAGE THE ASSESSEE HAS SUBMITTED THE FOLLOWING DOCUMENTS AND EVIDENCES: (I). SHARE APPLICATION FORM, (II). ACKNOWLEDGEMENT OF RETURN OF INCOME, (III).AUDITED FINANCIAL STATEMENTS, (IV).BANK STATEMENTS, (V).MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION OF THE SHARE APPLICANTS. (VI) THE TRANSACTIONS HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. (VII) THE INVESTOR COMPANIES ARE REGISTERED WITH ROC AND ARE ACTIVE COMPANIES AS PER ROC RECORDS. (VIII) PAN OF SHARE APPLICANTS, BALANCE SHEET, PROFIT AND LOSS ACCOUNTS. 12. BASED ON THESE DOCUMENTS AND EVIDENCES, WE NOTE THAT ASSESSING OFFICER, DURING THE ASSESSMENT STAGE ITSELF, HAS ACCEPTED M/S RAMA TRADE LINK PVT. LTD., ONE OF THE PAGE | 8 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., SHARE APPLICANTS COMPANIES, AS A GENUINE SHARE APPLICANT COMPANY AND THEREFORE DID NOT MAKE ADDITION OF RS.20,00,000/-.FROM THE ABOVE DETAILS AND THE PAPER BOOK FILED BY ASSESSEE, WHICH WERE ALSO BEFORE THE ASSESSING OFFICER THEREFORE, IT WILL BE EVIDENT THAT IN CASE OF ALL THE SHARE APPLICANTS THE SHARE APPLICATION FORM AND ALLOTMENT LETTER IS AVAILABLE (II) THE SHARE APPLICANTS ARE INCOME TAX ASSESSEES AND ARE FILING THEIR RETURN OF INCOME (III) THE SHARE APPLICATION WERE MADE OUT OF ACCOUNT PAYEE CHEQUES (IV) THE BANK ACCOUNTS BELONGED TO THE APPLICANTS (V) IN NONE OF THE TRANSACTIONS HAS THE AO FOUND DEPOSIT OF CASH BEFORE ISSUE OF CHEQUES TO THE ASSESSEE COMPANY (VI) THE APPLICANTS ARE HAVING SUBSTANTIAL CREDITWORTHINESS WHICH IS REPRESENTED BY THE FREE RESERVES AND CAPITAL. THEREFORE, LD COUNSEL CLAIMED THAT BY SUBMITTING THESE PLETHORA DOCUMENTS, THAT ASSESSEE COMPANY HAS PROVED THREE INGREDIENTS OF SECTION 68, NAMELY, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBERS COMPANIES. 13. WE NOTE THAT LD CIT(A) IN HIS APPELLATE ORDER HAS DISCUSSED EACH SHARE APPLICANT COMPANY. THE VARIOUS INQUIRIES CONDUCTED BY THE AO IN REGARD TO THESE THREE INVESTOR COMPANIES AND THE ASSESSEES SUBMISSION, ARE REPRODUCED BELOW: (A)(I) YASH BUILD HOME DEVELOPERS PVT. LTD. - SHARE CAPITAL OF RS.16,00,000/- AND SHARE PREMIUM OF RS. 64,00,000/-. THE AO HELD THAT THE AUTHORIZED CAPITAL OF THE INVESTOR COMPANY WAS RS. 5,00,000/- WHICH HAD ALREADY BEEN SUBSCRIBED AND THERE WAS NO SCOPE FOR FURTHER SHARE ALLOCATION AND FOUND THAT THE SHARE APPLICATION MONEY PENDING ALLOTMENT WAS OF RS.1,22,50,000/- AS ON 31.03.2011 AND RS.2,15,10,000/- AS ON 31.03.2012 WHICH IS AGAINST THE COMPANY LAW AND REFLECTED THE DUBIOUS AFFAIRS OF THE COMPANY. THE AO OBSERVED THAT THE SHARE APPLICATION MONEY HAD BEEN RECEIVED BY THE INVESTOR COMPANY FROM 13 PERSONS DESPITE HAVING NO. SHARE TO ISSUE WHICH SHOWS THE AUDIT CARRIED OUT BY THE INVESTOR COMPANY AS UNRELIABLE. THE AO HELD THAT THE AMOUNT OF RS. 80,00,000/- SHOWS BY THE ASSESSEE AS SHARE APPLICATION MONEY HAS BEEN SHOWN IN THE ACCOUNTS OF THE INVESTOR COMPANY AS SHORT TERM LOANS AND ADVANCES. THE INVESTOR COMPANY SHOWS NO TURNOVER AND THE INCOME BREAKUP IS NOT GIVEN AND THE VARIOUS ENTRIES IN THE BANK ACCOUNTS RELATED TO GINNY ENTERPRISE AND SURYA INDUSTRIES IT NOT REFLECTED IN THE BALANCE SHEET. THE AO FOUND THAT THE TRANSACTIONS IN THE BANK ACCOUNT OF BANK OF MAHARASTRA AND THE BANK STATEMENTS OF BANK OF BARODA DO NOT MATCH WITH THE AUDIT REPORT. THE AO IN THE ASSESSMENT ORDER HAS GIVEN A FINDING THAT THE BANK ACCOUNT TRANSACTIONS OF THE INVESTOR COMPANIES IS NOT CO- RELATED TO THE AUDIT REPORT. THE AO ISSUED COMMISSION U/S 131(1)(D) OF THE ACT TO THE INVESTIGATION WING, DELHI TO INVESTIGATE 7 COMPANIES WHICH HAVE INVESTED IN THE ABOVE INVESTOR COMPANY I.E. YASH BUILDHOME DEVELOPERS LTD. THE INVESTIGATION WING REPORTED THAT SUMMONS COULD NOT BE SERVED IN THE CASE OF 4 COMPANIES AND IN CASE OF 2 COMPANIES DETAILS WERE FILED IN TAPAL/DAAK AND IN CASE OF 1 COMPANY NO COMPLIANCE WAS MADE. THE PAGE | 9 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., AO HELD THAT THE AFFAIRS OF THE INVESTOR COMPANY ARE NOT GENUINE AND THEREFORE THE AMOUNT OF SHARE CAPITAL RECEIVED BY THE ASSESSEE IS NOT GENUINE AND MADE THE ADDITION U/S 68 OF THE ACT. (A)(II) THE ASSESSEE SUBMITTED THAT THE FINDING OF THE AO THAT THIS INVESTOR COMPANY IS A PRIVATE LIMITED COMPANY IS INCORRECT AS IT IS A PUBLIC COMPANY AND THE SUMMONS U/S 131 OF THE ACT WAS ISSUED AND IN COMPLIANCE TO THE SUMMONS, THE DETAILS HAVE BEEN SUBMITTED BEFORE THE INVESTIGATION WING, DELHI. THE FINDING OF THE AO THAT THE INVESTOR COMPANY AUTHORIZED SHARE CAPITAL WAS ONLY OF RS.5,00,000/- IS INCORRECT AS THE AUTHORIZED SHARE CAPITAL OF THE WAS INCREASED TO RS.2,00,00,000/- WHICH IS VERIFIABLE FROM THE ROC RECORDS. THE AO HAS ERRONEOUSLY HELD THAT THE REDUCTION IN THE AMOUNT SHARE APPLICATION MONEY IN THE INVESTOR COMPANY MAKES THE TRANSACTIONS DOUBTFUL BUT HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE SHARE APPLICATION MONEY WAS RETURNED TO THE VARIOUS CONCERNS DURING THE YEAR WHICH LED TO THE REDUCTION IN THE CAPITAL. THE AO HAS HELD THAT THE AUDIT REPORT OF THE INVESTOR COMPANY IS INCORRECT AND DOUBTFUL THOUGH THE BOOKS OF ACCOUNTS HAVE NOT BEEN EXAMINED BY THE AO BEFORE ARRIVING AT THIS CONCLUSION. THE AO HAS POINTED OUT THAT THE BANK STATEMENT DOES NOT RECONCILE WITH THE BALANCE SHEET IS AGAIN ERRONEOUS BECAUSE ON THE PERUSAL OF THE BANK STATEMENT IN THE CONTEXT OF GINNY ENTERPRISES AND SURYA INDUSTRIES IT IS SEEN THAT THE CHEQUES OF THE ABOVE TWO ENTITIES OF RS.1,50,000/AND RS.3,40,000/- GOT CLEARED ON 2.04.2011 AND THE BANK BALANCE COMES TO RS.4,92,950/- WHICH RECONCILES WITH THE BANK BALANCE SHOWN IN THE BOOKS OF ACCOUNTS. THIS INDICATES THAT CHEQUES RECEIVED AND ENTERED IN BOOKS AS ON 31ST MARCH GOT CLEARED AFTER 2 ND DAYS ON 2 ND APRIL. THE AO IN THE ASSESSMENT ORDER HELD THAT SUMMONS WERE ISSUED TO THE COMPANIES WHO HAVE MADE INVESTMENT IN THE INVESTOR COMPANY IS AGAIN AN INCORRECT FINDINGS AS THE ASSESSEE HAS NO TRANSACTIONS WITH THESE COMPANIES. THE ASSESSEE SUBMITTED THAT HE HAD SOUGHT ADJOURNMENT ON EARLIER OCCASION BUT THE AO DID NOT SPECIFY ANY DATE ON WHICH THE ATTENDANCE WAS REQUIRED. (A)(III) ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE INVESTOR COMPANY IS NOT A PRIVATE LIMITED COMPANY BUT IS A PUBLIC COMPANY AND IS NOT CLOSELY HELD COMPANY WHEREIN THE LEVEL OF COMPLIANCES BEFORE THE ROC IS HIGHER. THE INVESTOR COMPANY HAD RAISED ITS AUTHORISED SHARE CAPITAL FROM RS.5,00,000/- TO RS.2,00,00,000/- IN THE SUBSEQUENT YEARS AS PER THE DETAILS FILED BY THE ASSESSEE WHICH SHOWS THAT THE AO HAS WRONGLY OBSERVED THAT THE ASSESSEE AUTHORISED CAPITAL WAS ONLY RS.5 LACS. THE SUMMONS WAS ISSUED U/S 131 OF THE ACT WHICH WAS SERVED ON THE INVESTOR COMPANY AND THE DETAILS WERE ALSO FURNISHED BEFORE THE INVESTIGATION WING, DELHI. DURING THE APPELLATE PROCEEDINGS, THE CASE RECORDS WERE OBTAINED FROM THE AO AND THE DETAILS ON RECORD WERE EXAMINED. THE INVESTIGATION WING DELHI VIDE ITS REPORT DATED 17.03.2015 HAD SUBMITTED THAT THE SUMMONS WERE SERVED IN THE CASE OF YASH BUILDHOME DEVELOPERS LTD. AND IN COMPLIANCE TO THE SUMMONS, THE DETAILS OF THE RETURN OF INCOME, BALANCE SHEET, LEDGER ACCOUNT, ETC. WERE FILED BEFORE THE INVESTIGATION WING. THE AO HAD ALSO ISSUED NOTICE U/S 133(6) OF THE ACT TO THIS INVESTOR COMPANY AND THE COMPLIANCE WAS ALSO MADE AND THE DETAILS WERE FILED BEFORE THE AO AS PER THE QUERY RAISED U/S 133(6) OF THE ACT. THE AO IN THE ASSESSMENT ORDER HAD MENTIONED THAT THE INQUIRIES WERE CONDUCTED IN THIS CASE EXAMINE THE FLOW OF FUNDS AND THE AO HAD HELD THAT THE FUNDS WERE TRANSFERRED THROUGH 3 LAYERS OF VARIOUS PERSONS WHICH PROVED THAT THESE ARE NON-GENUINE COMPANIES. THE REPORT OF THE INVESTIGATION WING DATED 17.03.2015 ALONGWITH THE ANNEXURES WAS PERUSED AND IT WAS FOUND THAT IN THE CASE OF M/S GOPALAN AGRO FARM PVT. LTD., M/S S D VOHRA LEASING AND FINANCE LTD., M/S DECENT AGENCIES PVT. LTD., AND M/S RUPAK ENGINEERING CO. LTD., THE SUMMONS WERE NOT SERVED BY THE INVESTIGATION WING DUE TO INCOMPLETE ADDRESSES AS PER THE POSTAL DEPARTMENT REMARKS. SINCE, THE SUMMONS PAGE | 10 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., ITSELF WERE NOT SERVED THE COMPLIANCE WAS NOT POSSIBLE TO BE MADE BY THESE COMPANIES WHICH HAD INVESTED IN THE INVESTOR COMPANIES AND THEREFORE THE AO FINDING THAT NO COMPLIANCE WAS MADE BY THESE CONCERNS IS ERRONEOUS. (A)(IV) THE AO IN THE ASSESSMENT ORDER HAS MENTIONED THAT MS. VANDANA BAJAJ WAS THE 3RD LAYER FROM WHOM THE SOURCES OF FUND HAD COME AND SHE HAD MADE NO COMPLIANCE BEFORE THE INVESTIGATION WING THOUGH THE SUMMONS WERE SERVED BY THE INVESTIGATION WING, DELHI. THE DETAILS IN THE CASE RECORDS ALONGWITH THE INVESTIGATION WINGS REPORT SHOW THAT THE SUMMONS WERE SERVED ON MS. VANDANA BAJAJ WITH DATE OF COMPLIANCE FOR 11/02/2015 BUT UNFORTUNATELY HER MOTHER IN LAW PASSED AWAY ON 10.02.2015. THE ADJOURNMENT WAS GRANTED FOR 26/02/2015. SUBSEQUENTLY, MS. VANDANA BAJAJ FILED THE DETAILS VIDE HER LETTER DATED 24/02/2015 BEFORE THE INVESTIGATION WING, DELHI PERTAINING TO HER RETURN OF INCOME, BANK STATEMENT, ETC. THE DETAILS FURNISHED BY THE MS. VANDANA BAJAJ SHOWED THAT SHE HAD FILED THE RETURN OF INCOME SHOWING INCOME OF RS.29,70,791/- FROM SHARE TRADING AND RENTAL INCOME AND IN HER BANK STATEMENT THERE WAS NO CASH DEPOSITS. THE BANK STATEMENT SHOWED REGULAR TRANSACTIONS PERTAINING TO HER SOURCE OF INCOME AND NO UNUSUAL TRANSACTIONS IN THE BANK ACCOUNT WERE FOUND. THE REPORT OF THE INVESTIGATION WING IS SILENT ON THIS ASPECT THOUGH THE ANNEXURES OF THE DETAILS FILED HAVE BEEN SENT AS ANNEXURE TO THE REPORT. THE AO HAS NOT TAKEN THESE FACTS INTO CONSIDERATION AND HAS ERRONEOUSLY HELD THAT NO COMPLIANCE WAS MADE BY MS. VANDANA BAJAJ. (A)(V) THE OBSERVATIONS MADE BY THE AO REGARDING THE ALLEGED DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE INVESTOR COMPANY COULD BE ONLY EXPLAINING BY INDIVIDUAL INVESTORS IN THEIR OWN CASES BY PRODUCING RELEVANT LEDGER ACCOUNTS AND RECORDS. THE AO HAS NOT MADE ANY SUCH EFFORTS TO CONFRONT THESE DETAILS TO THE INVESTOR COMPANY. THE AO HAS FAILED TO SEEK ANY CLARIFICATIONS FROM THE INVESTOR COMPANY & UNLESS & UNTIL THE SAME ARE VERIFIED, IT IS NOT POSSIBLE TO ARRIVE AT ANY CONCLUSION AS TO WHETHER THE AMOUNT RECEIVED FROM VARIOUS PARTIES SHOULD FIND A MENTION IN THE BALANCE SHEET OR NOT. QUERIES RELATING TO ACCOUNTING ENTRIES IN THE BOOKS OF INVESTORS CAN BE RAISED IN THEIR INDIVIDUAL CASES AND RELEVANT EXPLANATION CAN BE CALLED FOR FROM THEM. BUT NO SUCH EFFORTS HAVE BEEN MADE BY THE AO. HE HAS SUO-MOTTO PICKED UP THE FEW DETAILS FROM THE FINANCIAL STATEMENTS AND HAS DRAWN ADVERSE COMMENTS BASED ON HIS OWN CONJECTURES AND SURMISES WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. IT IS ALSO NOT THE CASE OF AO THAT PRIOR TO MAKING INVESTMENT IN ASSESSEES SHARE CAPITAL, CASH DEPOSIT IS MADE IN THE BANK ACCOUNT OF INVESTORS. (A)(VI) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT THE FINDING OF THE AO THAT THE SHARE APPLICATION MONEY RECEIVED FROM YASH BUILDHOME DEVELOPERS LTD. IS NOT VERIFIABLE IS ERRONEOUS FINDING AS THIS INVESTOR HAS FILED THE CONFIRMATIONS IN RESPONSE TO THE NOTICE U/S 133(6) OF THE ACT AND ALSO COMPLIANCE WAS MADE IN RESPONSE TO THE SUMMONS ISSUED. THE AO HAS TAKEN ADVERSE VIEWS IN REGARDS TO THE COMPANIES WHICH HAVE BEEN INVESTED IN YASH BUILDHOME DEVELOPERS PVT. LTD. AS DISCUSSED ABOVE AS NOT TRACEABLE WITHOUT APPRECIATING THE FACT THAT THE SUMMONS WERE NOT SERVED AND THEREFORE THE QUESTION OF ANY COMPLIANCES DOES NOT ARISE. THE INVESTIGATION WING, DELHI HAS NOT CARRIED OUT ANY INQUIRIES OR EFFORTS TO GET THE SUMMONS SERVED AS THE ADDRESSES GIVEN BY THE AO TO THE INVESTIGATION WING, DELHI WAS INCOMPLETE AS PER THE POSTAL AUTHORITIES REPORT. THE THIRD LAYER AS PER THE FINDING OF THE AO WAS MS. VANDANA BAJAJ WHO HAD FILED THE ALL THE DETAILS BEFORE THE DDIT, INVESTIGATION DELHI AS DISCUSSED ABOVE AND THE ADVERSE VIEW HAS BEEN TAKEN BY THE AO ON THE INCORRECT FINDING THAT NO COMPLIANCE WAS MADE. HENCE, THE INVESTMENT MADE BY YASH PAGE | 11 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., BUILDHOME PVT. LTD. OF RS. 80, 00,000/- IS FOUND TO BE GENUINE AND THE ADDITION MADE THE AO U/S 68 IS DELETED. B)(I) YASH TRADEX OVERSEAS PVT. LTD. - SHARE CAPITAL OF RS.10,00,000/-AND SHARE PREMIUM OF RS.40,00,000/-: THE AO FOUND THAT THE INVESTOR COMPANY HAS RECEIVED SHARE APPLICATION MONEY FROM VARIOUS PERSONS WHICH HAVE BEEN TRANSFERRED IN VIOLATION OF COMPANY LAW AND THE FUNDS REPAID DO NOT APPEAR IN THE BANK STATEMENT OF THE INVESTOR COMPANY. THE AO HELD THAT CASH DEPOSITS HAVE BEEN FOUND ON VARIOUS DATES AMOUNTING TO RS.16,47,500/- BUT THE INVESTOR COMPANY DID NOT HAVE SUFFICIENT CASH BALANCE AS ON 31.03.2011 WHICH SHOWS THAT THE AUDIT REPORT IS ERRONEOUS AND NOT BASED ON THE REAL ACTIVITY OF THE INVESTOR COMPANY. THE AO TREATED THIS AMOUNT OF RS.50,00,000/- RECEIVED FROM THE INVESTOR COMPANY AS SHARE APPLICATION MONEY AS UNDISCLOSED U/S 68 OF THE ACT AND MADE THE ADDITION. (B)(II) THE ASSESSEE CONTENDED THAT THE AO HAS WRONGLY OBSERVED THAT THE FUNDS HAVE BEEN RECEIVED BY THE INVESTOR COMPANY IN VIOLATION OF COMPANY LAW BECAUSE THE NECESSARY RESOLUTION FOR INCREASING THE AUTHORIZED SHARE CAPITAL HAD ALREADY BEEN INCREASED FROM RS.50,00,000/- TO RS.1.50 CRORES IN THE SUBSEQUENT YEAR. IT WAS CONTENDED THAT THE AO HAS WRONGLY HELD IN THE ASSESSMENT ORDER THAT THE ENTRIES IN THE BALANCE SHEET DO NOT MATCH WITH THE ENTRY IN THE BANK ACCOUNT BECAUSE WITHOUT THE ANALYSIS OF THE LEDGER ACCOUNTS IN RELATION TO THE BOOKS OF ACCOUNTS THE OBSERVATION OF THE AO THAT THE BALANCE SHEET IS INCORRECT VIS-A-VIS THE BANK STATEMENT IS FALLACIOUS. THE ASSESSEE CANNOT EXPLAIN THE VARIOUS ENTRIES IN THE BANK STATEMENT IN THE INVESTOR COMPANIES AS IT HAS TO BE EXPLAINED AND EXAMINED BY THE INVESTOR COMPANY ITSELF. (B)(III) ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE INVESTOR COMPANY HAD RAISED ITS AUTHORISED SHARE CAPITAL FROM RS.50,00,000/- TO RS.1,50,00,000/- IN THE SUBSEQUENT YEARS AS PER THE ROC DETAILS FILED BY THE ASSESSEE WHICH SHOWS THAT THE AO HAS WRONGLY OBSERVED THAT THE ASSESSEE AUTHORISED CAPITAL WAS ONLY RS.50 LACS. THE SUMMONS WAS ISSUED U/S 131 OF THE ACT WHICH WAS SERVED ON THE INVESTOR COMPANY AND THE DETAILS WERE ALSO FURNISHED BEFORE THE INVESTIGATION WING, DELHI. DURING THE APPELLATE PROCEEDINGS, THE CASE RECORDS WERE OBTAINED FROM THE AO AND THE DETAILS ON RECORD WERE EXAMINED. THE INVESTIGATION WING DELHI VIDE ITS REPORT DATED 17.03.2015 HAD SUBMITTED THAT THE SUMMONS WERE SERVED IN THE CASE OF YASH TRADEX OVERSEAS PVT. LTD AND IN COMPLIANCE TO THE SUMMONS, THE DETAILS OF THE RETURN OF INCOME, BALANCE SHEET, LEDGER ACCOUNT, BANK STATEMENT ETC. WERE FILED BEFORE THE INVESTIGATION WING. THE AO HAD ALSO ISSUED NOTICE U/S 133(6) OF THE ACT TO THIS INVESTOR COMPANY AND THE COMPLIANCE WAS ALSO MADE AND THE DETAILS WERE FILED BEFORE THE AO AS PER THE QUERY RAISED U/S 133(6) OF THE ACT. THIS INVESTOR COMPANY WAS ALSO FOUND TRACEABLE AT THE GIVEN ADDRESS AND NO ADVERSE FINDING ON THE EXISTENCE OF THIS COMPANY HAS BEEN FOUND BY THE AO DURING THE ASSESSMENT PROCEEDINGS. (B)(IV) THE AO HAS GIVEN A FINDING THAT THE EXAMINATION OF THE BANK STATEMENT OF THE INVESTOR COMPANY SHOWS THAT THE CASH DEPOSITS OF RS. 16,47,500/- HAD BEEN MADE IN THE ACCOUNT ON VARIOUS DATES FROM 08.09.2011 TO 29.03.2012 WHICH SHOWED THAT THE COMPANY WAS NOT HAVING SUFFICIENT CASH BALANCE. THE DETAILS ON RECORD AND EXAMINATION OF THE BANK STATEMENT OF THE ASSESSEE COMPANY SHOWS THAT THE CASH DEPOSITS IN THE BANK ACCOUNT OF THIS INVESTOR COMPANY HAS NO RELATION WITH THE INVESTMENT MADE BY THE INVESTOR COMPANY IN THE SHARES OF THE ASSESSEE COMPANY. THE INVESTMENT FOR THE SHARE CAPITAL BY THIS INVESTOR COMPANY HAVE BEEN MADE OF RS. 25,00,000/- EACH - ON 30.05 2011 AND ON 01.6.2011, WHILE THE CASH DEPOSITS IN THE BANK OF YASH TRADEX OVERSEAS PVT. LTD, HAS BEEN MADE IN PAGE | 12 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., SEPTEMBER 2011 TO MARCH 2012. THE SUMMONS WERE ISSUED TO THE DIRECTORS OF THE YASH TRADEX OVERSEAS PVT. LTD. BY THE INVESTIGATION WING, DELHI ON 3/02/2018 AND THE INVESTOR COMPANY HAD SUBMITTED THE DETAILS VIDE ITS LETTER DATED NIL BEFORE THE INVESTIGATION WING. THE DIRECTOR OF THE INVESTOR COMPANY SHRI RAJIV RANJAN SINGH ALSO SUBMITTED A WRITTEN REPORT/STATEMENT TO THE ITI OF THE INVESTIGATION WING SHRI AMIT SHARMA ON 28/01/2015 WHEN HE HAD VISITED THE OFFICE PREMISES OF THE INVESTOR COMPANY AT 3/303, THIRD FLOOR, ASHISH COMPLEX, NEW RAJDHANI COMPLEX,VIKAS MARG, NEW DELHI FOR ON SPOT VERIFICATIONS AND ENQUIRY. ON THE PERUSAL OF THIS WRITTEN STATEMENT/ REPORT, IT IS OBSERVED THAT THE 2 DIRECTORS OF THE COMPANY NAMELY SANJAY KOHLI AND RAJEEV RANJAN SINGH HAD FURNISHED THE DETAILS BEFORE THE INVESTIGATION WING, DELHI TO PROVE THE IDENTITY OF THE COMPANY AND HIS DIRECTORS ALONGWITH THE COPY OF THE BANK ACCOUNT, TAX RETURN, LEDGER ACCOUNT, RENTAL AGREEMENT ETC. (B)(V) THE OBSERVATIONS MADE BY THE AO REGARDING THE ALLEGED DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE INVESTOR COMPANY COULD BE ONLY EXPLAINED BY INDIVIDUAL INVESTORS IN THEIR OWN CASES BY PRODUCING RELEVANT LEDGER ACCOUNTS AND RECORDS. THE AO HAS NOT MADE ANY SUCH EFFORTS TO CONFRONT THESE DETAILS TO THE INVESTOR COMPANY. THE AO HAS FAILED TO SEEK ANY CLARIFICATIONS FROM THE INVESTOR COMPANY & UNLESS & UNTIL THE SAME ARE VERIFIED, IT IS NOT POSSIBLE TO ARRIVE AT ANY CONCLUSION AS TO WHETHER THE AMOUNT RECEIVED FROM VARIOUS PARTIES SHOULD FIND A MENTION IN THE BALANCE SHEET OR NOT. QUERIES RELATING TO ACCOUNTING ENTRIES IN THE BOOKS OF INVESTORS CAN BE RAISED IN THEIR INDIVIDUAL CASES AND RELEVANT EXPLANATION CAN BE CALLED FOR FROM THEM. BUT NO SUCH EFFORTS HAVE BEEN MADE BY THE AO. HE HAS SUO-MOTTO PICKED UP THE FEW DETAILS FROM THE FINANCIAL STATEMENTS AND HAS DRAWN ADVERSE COMMENTS BASED ON HIS OWN CONJECTURES AND SURMISES WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. IT IS ALSO NOT THE CASE OF AO THAT PRIOR TO MAKING INVESTMENT IN ASSESSEES SHARE CAPITAL, CASH DEPOSIT IS MADE IN THE BANK ACCOUNT OF INVESTORS. (B)(VI) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT THE FINDING OF THE AO THAT THE SHARE APPLICATION MONEY RECEIVED FROM YASH TRADEX OVERSEAS PVT. LTD. IS NOT VERIFIABLE IS ERRONEOUS FINDING AS THIS INVESTOR HAS FILED THE CONFIRMATIONS IN RESPONSE TO THE NOTICE U/S 133(6) OF THE ACT AND ALSO COMPLIANCE WAS MADE IN RESPONSE TO THE SUMMONS ISSUED. THE AO HAS POINTED OUT DISCREPANCIES REGARDING CERTAIN ACCOUNTING ENTRIES IN THE BOOKS OF THE INVESTOR COMPANIES WHICH HAVE GOT NO RELATION WITH THE INVESTMENT MADE IN THE SHARE CAPITAL. THE CASH DEPOSIT FOUND IN THE BANK STATEMENT HAS GOT NO RELATIONSHIP WITH THE SHARE CAPITAL AS THE AMOUNT WAS ALREADY INVESTED IN THE MONTH OF MAY AND JUNE 2011 WHILE THE CASH DEPOSITS RELATES TO SEPTEMBER 2011 TO MARCH 2012. HENCE, THE INVESTMENT MADE BY YASH TRADEX OVERSEAS PVT. LTD. OF RS. 50,00,000/- IS FOUND TO BE GENUINE AND THE ADDITION MADE THE AO U/S 68 IS DELETED. (C)(I) YASH IT SOLUTIONS PVT, LTD. SHARE CAPITAL OF RS. 10,00,000/- AND SHARE PREMIUM OF RS. 40,00,000/-: THE AO FOUND THAT THE INVESTOR COMPANY DID NOT COMPLY TO THE SUMMONS ISSUED U/S 131 BY THE INVESTIGATION WING, DELHI AND NEITHER THE NOTICE U/S 133(6) OF THE ACT COULD BE SERVED. THE AO MADE THE ANALYSIS OF THE INVESTOR COMPANY BANK STATEMENT AND AUDIT REPORT FOUND THAT DURING THE YEAR NO NEW SHARE HAVE BEEN ISSUED BUT SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM 4 NEW PERSONS. THE AO HELD THAT THE CHANGES IN THE FUNDS AS APPEARING IN THE BALANCE SHEET DO NOT MATCH WITH THE ENTRY IN THE BANK ACCOUNT WHICH SHOWS THE DUBIOUS TRANSACTIONS OF THE INVESTOR COMPANY. THE AO NOTED THAT THE BANK STATEMENTS AND THE AUDIT REPORT ARE NOT RECONCILED AND THEREFORE HELD THAT THE SHARE APPLICATION MONEY RECEIVED OF RS.50,00,000/- IS NOT GENUINE AND ADDED U/S 68 OF THE ACT. PAGE | 13 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., (C)(II) THE ASSESSEE HELD THAT THE AO HAD ISSUED COMMISSION U/S 131(1)(D) OF THE ACT TO INVESTIGATION WING, DELHI AND THE SUMMONS U/S 131 WAS SERVED BY THE INSPECTOR OF THE INVESTIGATION WING WHICH PROVES THE EXISTENCE OF THE INVESTOR COMPANY. THE NAME OF THE INVESTOR COMPANY EARLIER WAS M/S VS IT SOLUTIONS PVT. LTD, WHICH WAS SUBSEQUENTLY CHANGED TO YASH IT SOLUTION PVT. LTD. AND THERE IS NO DISCREPANCY IN THE NAME OF THE INVESTOR AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER. THE AUTHORIZED SHARE CAPITAL OF THE COMPANY HAD INCREASED TO 1.30 CRORES FROM 25,00,000/-IN SUBSEQUENT YEAR AND THEREFORE THE RECEIPT OF SHARE APPLICATION MONEY WITHOUT THE ISSUE OF FRESH SHARES CANNOT BE VIEWED ADVERSELY, IT WAS CONTENDED THAT THE AO HAS WRONGLY HELD IN THE ASSESSMENT ORDER THAT THE ENTRIES IN THE BALANCE SHEET DO NOT MATCH WITH THE ENTRY IN THE BANK ACCOUNT BECAUSE WITHOUT THE ANALYSIS OF THE LEDGER ACCOUNTS IN RELATION TO THE BOOKS OF ACCOUNTS THE OBSERVATION OF THE AO THAT THE BALANCE SHEET IS INCORRECT VIS-A-VIS THE BANK STATEMENT IS FALLACIOUS. THE ASSESSEE CANNOT EXPLAIN THE VARIOUS ENTRIES IN THE BANK STATEMENT IN THE INVESTOR COMPANIES AS IT HAS TO BE EXPLAINED AND EXAMINED BY THE INVESTOR COMPANY ITSELF. (C)(III) ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE INVESTOR COMPANY HAD RAISED ITS AUTHORISED SHARE CAPITAL FROM RS.25,00,000/- TO RS.1,30,00,000/- IN THE SUBSEQUENT YEARS AS PER THE ROC DETAILS FILED BY THE ASSESSEE WHICH SHOWS THAT THE AO HAS WRONGLY OBSERVED THAT THE ASSESSEE AUTHORISED CAPITAL WAS ONLY RS.25 LACS. THE AO HELD THAT THE NOTICE U/S. 133(6) WAS NOT SERVED ON THE ASSESSEE BUT AS PER THE REPORT OF THE INVESTIGATION WING, THE SUMMONS WERE ISSUED BY THE INVESTIGATION WING, DELHI AND SERVED ON THE INVESTOR COMPANY. THE NAME OF THE COMPANY YASH IT SOLUTIONS PVT. LTD. WAS EARLIER VS IT SOLUTIONS PVT. LTD. AS PER THE ROC RECORD WHICH WAS SUBSEQUENTLY CHANGED. THE AO HAS GIVEN A FINDING THAT THE EXAMINATION OF THE BANK STATEMENT OF THE INVESTOR COMPANY SHOWS THAT THE CASH DEPOSITS OF RS.10,35,000/- HAD BEEN MADE IN THE ACCOUNT ON VARIOUS DATES FROM 25.06.2011 TO 13.10.2011 WHICH REVEALED THAT THE COMPANY WAS NOT HAVING SUFFICIENT CASH BALANCE. DURING THE APPELLATE PROCEEDINGS ON THE EXAMINATION OF THE BANK STATEMENT OF THE ASSESSEE COMPANY IT IS FOUND THAT THAT THE CASH DEPOSITS IN THE BANK ACCOUNT OF THIS INVESTOR COMPANY HAS NO RELATION WITH THE INVESTMENT MADE BY THE INVESTOR IN THE SHARES OF THE ASSESSEE COMPANY. THE INVESTMENT FOR THE SHARE CAPITAL BY THIS INVESTOR COMPANY HAVE BEEN MADE OF RS. 25,00,000/-ON 30.05.2011 AND RS. 22,00,000/- ON 02.6.2011 AND RS.3,00,000/- 09.06.2011 WHILE THE CASH DEPOSITS IN THE BANK OF YASH IT SOLUTIONS PVT. LTD BEEN MADE IN SEPTEMBER 2011 TO MARCH 2012. THE CASH DEPOSITS HAVE BEEN MADE SUBSEQUENT TO THE INVESTMENT IN THE SHARE CAPITAL AND HAVE GOT NO RELATIONSHIP WITH THE AMOUNT INVESTED IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. (C)(IV) THE OBSERVATIONS MADE BY THE AO REGARDING THE ALLEGED DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE INVESTOR COMPANY COULD BE ONLY EXPLAINED BY INDIVIDUAL INVESTOR IN THEIR OWN CASES BY PRODUCING RELEVANT LEDGER ACCOUNTS AND RECORDS. THE AO HAS NOT MADE ANY SUCH EFFORTS TO CONFRONT THESE DETAILS TO THE INVESTOR COMPANY. THE AO HAS FAILED TO SEEK ANY CLARIFICATIONS FROM THE INVESTOR COMPANY & UNLESS & UNTIL THE SAME ARE VERIFIED, IT IS NOT POSSIBLE TO ARRIVE AT ANY CONCLUSION AS TO WHETHER THE AMOUNT RECEIVED FROM VARIOUS PARTIES SHOULD FIND A MENTION IN THE BALANCE SHEET OR NOT. QUERIES RELATING TO ACCOUNTING ENTRIES IN THE BOOKS OF INVESTORS CAN BE RAISED IN THEIR INDIVIDUAL CASES AND RELEVANT EXPLANATION CAN BE CALLED FOR FROM THEM. BUT NO SUCH EFFORTS HAVE BEEN MADE BY THE AO. HE HAS SUO-MOTTO PICKED UP THE FEW DETAILS FROM THE FINANCIAL STATEMENTS AND HAS DRAWN ADVERSE COMMENTS BASED ON HIS OWN CONJECTURES AND SURMISES WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. IT IS ALSO NOT THE CASE OF AO THAT PRIOR TO MAKING INVESTMENT IN ASSESSEES SHARE CAPITAL, CASH DEPOSIT IS MADE IN THE BANK ACCOUNT OF INVESTORS. PAGE | 14 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., (C)(V) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE FINDING OF THE AO THAT THE SHARE APPLICATION MONEY RECEIVED FROM YASH IT SOLUTIONS PVT. LTD. IS NOT VERIFIABLE IS ERRONEOUS FINDING AS THIS INVESTOR WAS TRACEABLE. THE AO HAS POINTED OUT DISCREPANCIES REGARDING CERTAIN ACCOUNTING ENTRIES IN THE BOOKS OF THE INVESTOR COMPANIES WHICH HAVE GOT NO RELATION WITH THE INVESTMENT MADE IN THE SHARE CAPITAL. THE CASH DEPOSIT FOUND IN THE BANK STATEMENT HAS GOT NO RELATIONSHIP WITH THE SHARE CAPITAL AS THE AMOUNT WAS ALREADY INVESTED IN THE MONTH OF MAY AND JUNE 2011 WHILE THE CASH DEPOSITS RELATES TO SEPTEMBER 2011 TO MARCH 2012. HENCE, THE INVESTMENT MADE BY YASH IT SOLUTIONS PVT. LTD. OF RS. 50,00,000/- IS FOUND TO BE GENUINE AND THE ADDITION MADE THE AO U/S 68 IS DELETED. 6.1.4. ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE AO AT PARA 5 IN THE ASSESSMENT ORDER HAS MENTIONED THAT THE ASSESSEE HAS CHARGED PREMIUM OF RS. 90 PER SHARE WHILE AT PARA 5.2 IT IS MENTIONED AS RS. 40 PER SHARE. ON THE VERIFICATION OF THE DETAILS IT IS FOUND THAT THE ASSESSEE HAD CHARGED PREMIUM AT RS. 40 PER SHARE INSTEAD OF RS. 90/- AS MENTIONED. THE AO HAS ACCEPTED THE CHARGING OF THE PREMIUM AT RS 40/- FROM THE SISTER CONCERNS NAMELY M/S RAMA TRADE LINK PVT. LTD. AS GENUINE DURING THE YEAR. THE ASSESSEE IS IN THE BUSINESS OF TRADING OF YARN AND THE TURNOVER OF THE ASSESSEES COMPANIES FOR THE LAST 3 YEARS WAS EXAMINED WHICH IS AS FOLLOWING: A.Y. TURNOVER (RS.) RESERVES & SURPLUS (RS.) 2010-11 38,36,82,254 3,53,01,860 2011-12 50,91,94,750 3,56,23,314 2012-13 88,67,90,004 5,33,65,382 6.1.5. THE TURNOVER OF THE ASSESSEE HAS GONE FOR THE LAST 3 YEARS FROM 38.36 CRORES TO 88.67 CRORES IN THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE ALSO FURNISHED THE DETAILS REGARDING THE SOUND FINANCIAL FUNDAMENTALS OF THE ASSESSEE COMPANY WHICH HAS BEEN THE BASIS FOR GRANT OF LOANS BY THE BANKING INSTITUTIONS OF MORE THAN RS. 15,00,00,000/- TO THE ASSESSEE COMPANY. THE ISSUE OF CHARGING OF PREMIUM AS RS. 40/- PER SHARE ALSO CAME UP FOR CONSIDERATION IN THE ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO. 816/AHD/2013 WHEREIN THE HONBLE ITAT BENCH, AHMEDABAD, HELD THAT THE RATE OF RS. 40/- PER SHARE AS REASONABLE IN ITS ORDER DATED 05.01.2016. THEREFORE, THE ISSUE OF CHARGING OF PREMIUM OF RS. 40/- PER SHARE BY THE ASSESSEE COMPANY IS CONSIDERED TO BE REASONABLE VALUATION OF THE SHARES AND THE ADVERSE INFERENCE DRAWN BY THE AO IS FOUND TO BE ERRONEOUS AND WITHOUT ANY BASIS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS EVIDENT THAT THE AO HAS NOT BEEN ABLE TO ESTABLISH THE NON-EXISTENCE OF THE INVESTOR AND THE NON-GENUINENESS OF THE TRANSACTION IN THE SHARE CAPITAL AND THEREFORE, THE ADDITION OF RS. 1,80,00,000/- U/S 68 OF THE ACT IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 14. WE HAVE GONE THROUGH THE ABOVE FINDINGS OF LD CIT(A) AND NOTED THAT WHEN A QUESTION AS TO THE CREDITWORTHINESS OF A CREDITOR IS TO BE ADJUDICATED AND IF THE CREDITOR IS AN INCOME TAX ASSESSEE, IT IS NOW WELL SETTLED BY THE DECISION OF THE CALCUTTA HIGH COURT THAT THE CREDITWORTHINESS OF THE CREDITOR CANNOT BE DISPUTED BY THE AO OF THE ASSESSEE BUT THE AO OF THE CREDITOR. IN THIS REGARDS OUR ATTENTION WAS PAGE | 15 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE COMMISSIONER OF INCOME TAX, KOLKA TA-ILL VERSUS DATAWARE PRIVATE LIMITED ITAT NO. 263 OF 2011 DATE: 21ST SEPTEMBER, 2011 WHEREIN THE COURT HELD AS FOLLOWS: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS' OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENESS' OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL-ACCEPTED PRINCIPLE WHICH ARE REQUIRED TO BE FOLLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY BOTH THE AUTHORITIES. 15. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS AS HAS BEEN REPORTED IN CTR AT 216 CTR 295: 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE- COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 16. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT WHILE RELYING ON THE CASE OF LOVELY EXPORTS, IN THE APPEAL OF COMISSIONER OF INCOME TAX, KOLKATA-IV VS ROSEBERRY MERCANTILE (P) LTD., ITAT NO. 241 OF 2010 DATED 10- 01-2011 HAS HELD: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTED MONEY AND THE LD. CIT (A) PAGE | 16 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACTION. ' IT APPEARS FROM THE RECORD THAT IN THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION HAD BROUGHT RS. 4,00,000/- AND RS.20,00,000/- TOWARDS SHARE CAPITAL AND SHARE PREMIUM RESPECTIVELY AMOUNTING TO RS.24,00,000/- FROM FOUR SHAREHOLDERS BEING PRIVATE LIMITED COMPANIES. THE ASSESSING OFFICER ON HIS PART CALLED FOR THE DETAILS FROM THE ASSESSEE AND ALSO FROM THE SHARE APPLICANTS AND ANALYZED THE FACTS AND ULTIMATELY OBSERVED CERTAIN ABNORMAL FEATURES, WHICH WERE MENTIONED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT NATURE AND SOURCE OF SUCH MONEY WAS QUESTIONABLE AND EVIDENCE PRODUCED WAS UNSATISFACTORY. CONSEQUENTLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS UNDER SECTION 68/69 OF THE INCOME TAX ACT AND MADE ADDITION OF RS.24,00,000/-. ON APPEAL THE LEARNED CIT (A) BY FOLLOWING THE DECISION OF THE SUPREME COURT IN THE CASE OF CLT. VS. M/S. LOVELY EXPORTS PVT. LTD., REPORTED IN (2008) 216 CTR 195 ALLOWED THE APPEAL BY HOLDING -THAT SHARE CAPITAL/PREMIUM OF RS. 24,00,000/- RECEIVED FROM THE INVESTORS WAS NOT LIABLE TO BE TREATED UNDER SECTION 68 AS UNEXPLAINED CREDITS AND IT SHOULD NOT BE TAXED IN THE HANDS OF THE APPELLANT COMPANY. AS INDICATED EARLIER, THE TRIBUNAL BELOW DISMISSED THE APPEAL FILED BY THE REVENUE. AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASE OF CLT. VS. M/S. LOVELY EXPORTS PVT. LTD. [SUPRA], WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FAVOUR OF THE ASSESSEE AND THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 17. WE NOTE THAT ONCE THE BASIC DOCUMENTS SUCH AS, CONFIRMATION, COPY OF BANK ACCOUNT, COPY OF SHARE APPLICATION AND COPY OF INCOME TAX RETURNS OF THE CREDITORS, OR SHARE APPLICANTS HAVE BEEN FURNISHED BY THE ASSESSEE, THE ONUS OF PROVING THE ABOVE THREE ELEMENTS REQUIRED FOR SECTION 68 IS DISCHARGED. IT IS ALSO HELD THAT IF THERE IS ANY DOUBT REGARDING SOURCE OF THE SAID CREDITORS / SHARE APPLICANTS, THE MATTER CAN BE EXAMINED BY THE CONCERNED AO IN THE ASSESSMENT OF THE CREDITOR / SHARE APPLICANT. FOR THAT WE RELY ON THE FOLLOWING BINDING DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT GUJARAT: (I)CITV/S RANCHHOD JIVABHAI NAKHAWA ITA NO. 50/2011,(GUJ) (II) CIT V/S UJALA DYEING AND PRINTING MILLS (P) LD, 328 ITR 0437 (GUJ) PAGE | 17 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., 18. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HON`BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S HIMATSU BIMET LTD, 12 TAXMANN.COM87. (H C OF GUJ ), WHEREIN IT WAS HELD AS FOLLOWS: 4. AS CAN BE SEEN FROM THE IMPUGNED ORDER OF THE TRIBUNAL, THE TRIBUNAL HAS RECORDED THAT THE RESPONDENT-ASSESSEE HAD FILED CONFIRMATIONS FROM ALL SHARE APPLICANTS WITH DETAILS OF SHARE CAPITAL PAID WHICH CONTAINED DETAILS SUCH AS FULL ADDRESSES, PERMANENT ACCOUNT NUMBERS AND TAX JURISDICTION OF THE DEPOSITORS. THE TRIBUNAL FURTHER RECORDED THAT ALL PAYMENTS WERE RECEIVED BY CHEQUES AND WERE CREDITED IN THE BANK ACCOUNT OF THE RESPONDENT; THE SHARE APPLICATION FORMS CONTAINED ALL DETAILS OF THE DEPOSITORS; THEIR CONFIRMATIONS WERE CLEAR WITH ALL ADDRESSES; AND THAT THEY WERE ON THE DEPARTMENTAL RECORDS AS TAX-PAYERS. IN THE AFORESAID FACTUAL BACKGROUND, THE TRIBUNAL WAS OF THE VIEW THAT THE RESPONDENT HAD SUFFICIENTLY DISCHARGED ITS BURDEN OF EXPLAINING THE SAME. THE TRIBUNAL FURTHER OBSERVED THAT THE DEPARTMENT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE DEPOSITORS WERE BOGUS. ACCORDING TO THE TRIBUNAL NONE OF THE DECISIONS RELIED UPON BY THE REVENUE HAD HELD THAT THE ASSESSEE WAS REQUIRED TO ESTABLISH THE CREDIT WORTHINESS OF THE SHARE APPLICANTS STRICTLY IN THE MANNER UNDERSTOOD IN THE CONTEXT OF CASH CREDITS UNDER SECTION 68 OF THE ACT. THE TRIBUNAL WAS OF THE VIEW THAT THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE SHARE APPLICANTS, IT WAS WITHIN THE KNOWLEDGE OF THE REVENUE THAT THE SAID SHARE APPLICANTS WERE ASSESSED TO INCOME-TAX, HENCE THE BURDEN WAS ON THE REVENUE TO MAKE FURTHER INQUIRY. THE TRIBUNAL PLACED RELIANCE UPON THE DECISION OF THE APEX COURT IN THE CASE OF CIT V. DIVINE LEASING FINANCE CO. WHEREIN IT HAS BEEN HELD THAT WHEN THE ASSESSEE COMPANY HAD GIVEN THE NAME OF THE SHAREHOLDERS, THE DEPARTMENT WAS FREE TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW. 5. THE TRIBUNAL FURTHER OBSERVED THAT IN RESPECT OF MANGAL FINANCE LIMITED, THE SAID COMPANY WAS ASSESSED TO TAX ON DEPARTMENT RECORDS; THE COPIES OF THE APPLICATION FORMS WERE SUBMITTED BY THE SAID COMPANY, WHICH WERE AT PAGES 3 TO 14 OF THE PAPER BOOK; ALL FUNDS HAD BEEN RECEIVED BY CHEQUE AS PER BANK DETAILS AT PAGE 130 OF THE PAPER BOOK; IN THE AUDITED BALANCE-SHEET MANGAL FINANCE LIMITED WAS SHOWN TO HAVE BEEN ALLOTTED SHARES OF RS. 1.20 CRORES, WHICH FORMED PART OF TOTAL PAID UP CAPITAL OF RS. 3.80 CRORES OF THE ASSESSEE WHICH WAS DULY REFLECTED IN THE BALANCE-SHEET; AND THAT THE RETURN OF ALLOTMENT WAS ALSO FILED WITH REGISTRAR OF COMPANIES. IN THE AFORESAID FACTUAL MATRIX, THE TRIBUNAL WAS OF THE VIEW THAT THE RESPONDENT HAD DISCHARGED THE BURDEN AND ACCORDINGLY REVERSED THE FINDINGS OF THE COMMISSIONER (APPEALS). 6. THUS THE TRIBUNAL HAS AFTER APPRECIATION OF THE EVIDENCE ON RECORD FOUND AS A MATTER OF FACT THAT THE ASSESSEE HAD SUPPLIED ADDRESSES AND PERMANENT ACCOUNT NUMBERS AS WELL AS CONFIRMATION LETTERS OF THE SHARE APPLICANTS. IN THE CIRCUMSTANCES, IT WAS FOR THE REVENUE TO MAKE FURTHER INQUIRY IN CASE IT WAS OF THE OPINION THAT THE SHARE APPLICANTS WERE NOT GENUINE. IN ABSENCE OF ANY FINDINGS RECORDED BY THE ASSESSING OFFICER TO THE EFFECT THAT THE SHARE APPLICANTS ARE BOGUS, THERE IS NOTHING ON RECORD TO DOUBT OR DISBELIEVE THE CONFIRMATIONS AND APPLICATION FORMS SUBMITTED BY THE DEPOSITORS. IN THE CIRCUMSTANCES, NO INFIRMITY CAN BE FOUND IN THE IMPUGNED ORDER OF THE TRIBUNAL IN HOLDING THAT THE ASSESSEE HAD DISCHARGED ITS BURDEN. WHETHER BURDEN HAS BEEN DISCHARGED OR NOT IS A QUESTION OF FACT. 7. IN THE LIGHT OF THE AFORESAID, IT CANNOT BE SAID THAT THE IMPUGNED ORDER OF THE TRIBUNAL SUFFERS FROM ANY LEGAL INFIRMITY SO AS TO WARRANT INTERFERENCE. IN ABSENCE OF ANY SUBSTANTIAL QUESTION OF LAW, THE APPEAL IS DISMISSED. PAGE | 18 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., 19. IN THE LIGHT OF THE AFORESAID DECISION OF THE HONBLE APEX COURT AND JURISDICTIONAL HIGH COURT AND OTHER HIGH COURTS, WE NOTE THAT ASSESSEE COMPANY HAS DISCHARGED ITS ONUS TO PROVE THREE INGREDIENTS OF SECTION 68, NAMELY, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBERS COMPANIES. SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CASE, BOTH THE NATURE AND SOURCE OF THE SHARE APPLICATION RECEIVED WAS FULLY EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE APPLICANTS. THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED FINANCIAL STATEMENTS AND INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECORD. WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS BASED ON CONJECTURES AND SURMISES CANNOT BE JUSTIFIED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, LD CIT(A) HAS RIGHTLY DELETED THE ADDITION. THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. CIT(A) IN DELETING THE AFORESAID ADDITIONS. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER IS PRONOUNCED AT THE TIME OF HEARING OF APPEAL ON 30/06/2021 IN THE VIRTUAL COURT OF HEARING. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 30/06/2021 / SGR COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) PAGE | 19 ITA NO.3050/AHD/2016 FOR A.Y. 2012-13 M/S.PANKAJ ENKA PVT. LTD., 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT